Terminated participants

[Guest RJF]

Clarification needed - 2005 projections. Top Heavy SH 401(k) Plan. Cross testing using 3% SHNEC. Owners max's out 401(k) contribution, get 3% SH and 13.33% PS contribution. Normal eligibility, so no stat. exclusions. Last day provision/1000 hrs. All others get 3% SH and in order to pass non-discrimination testing they need another 4%. I have 4 Terms that get 3% SH. In order to pass gateway, they need another 1.44%. The problem is I fail cross-testing and in order to pass, I need to bump them up to the 7%. Is this necessary or can I stop at just the gateway? Does Terms with < then 500 hrs come into play for testing?

Thanks

[Draper55]

Clarification needed - 2005 projections. Top Heavy SH 401(k) Plan. Cross testing using 3% SHNEC. Owners max's out 401(k) contribution, get 3% SH and 13.33% PS contribution. Normal eligibility, so no stat. exclusions. Last day provision/1000 hrs. All others get 3% SH and in order to pass non-discrimination testing they need another 4%. I have 4 Terms that get 3% SH. In order to pass gateway, they need another 1.44%. The problem is I fail cross-testing and in order to pass, I need to bump them up to the 7%. Is this necessary or can I stop at just the gateway? Does Terms with < then 500 hrs come into play for testing?

Thanks

Why should the terms get anything other than the gateway since they are not present at eoy. I think you need to give other nhces more to pass cross testing. Terms must be counted if they benefited regardless of the 500 hours issue.

Draper1

[Tom Poje]

you have to follow the terms of the document.

since there is a last day provision, terms are not entitled to anything extra.

hopefully your document contains gateway language, if not, then you cant even bump them up to the gateway. If that happened then you wouldn't even be able to cross test. this means you would have to increase the contribution to the rank and file (or possibly test accrued to date rather than annual)

I am assuming you mean HCEs received 3% SHNEC and an additional 10.33% ps (rather than 13.33%)

are you talking a 2004 calendar year plan? At this late date it is hard to make corrections/adjustments, etc.

since terms < 500 hours received a nonelective contribution you can not exclude them from testing.